FORT WORTH, Texas (AP) – American Airlines will lay off 2,500 pilots, or 19 percent of the total, over the next year as it tries to avoid bankruptcy, union officials said Tuesday.

The move is part of the pilot union’s $660 million in concessions to save the world’s largest airline, said John Darrah, president of the 13,000-member Allied Pilots Association.

As part of an agreement reached with the airline Monday, pilot salaries will also be slashed 23 percent beginning May 1 and 17 percent each subsequent year of the six-year pact, Darrah said.

“I don’t think anybody’s thrilled with the significant pay cuts and furloughs … but the alternative clearly would be even worse,” union spokesman Gregg Overman said. Pilots have 14 days to ratify the new contract.

The concessions were part of $1.8 billion in total cuts secured by the airline from key labor leaders Monday. Union members are expected to vote on the accords over the next two weeks.

American chairman Donald J. Carty praised union leaders, saying their actions “have enabled us to avoid an immediate filing with the bankruptcy court.”

However, the industry is still battling its worst downturn ever, precipitated by fears of terrorism, an ailing economy and now the war in Iraq.

“If the war lasts for many months or if there’s another act of terrorism, then even these cost savings could prove insufficient,” said Philip Baggaley, Standard & Poor’s airline analyst.

Even if employees ratify the agreements, he said, it will still be critical for AMR Corp., the airline’s parent company, to secure additional financing from lenders as well as concessions from suppliers and lessors.

AMR has lost nearly $5.3 billion in the past two years and has faced increasing competition from low-fare carriers, which can afford to offer cheaper ticket prices because their labor costs are lower.

Other major airlines also are pushing employees to accept wage and benefit cuts as the industry racks up huge losses, and analysts said the momentum at United and American could spread. The lesson learned, several analysts said, is that restructuring can be done outside of bankruptcy court.

After the war in Iraq began, carriers laid of thousands of employees, cut certain flights from their schedules and reduced the frequency of others. But analysts say – even with new labor contracts – that major carriers still need to make further cuts to capacity, a move that would likely help them raise ticket prices.

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On the Net:

AMR: http://www.amrcorp.com

AP-ES-04-01-03 1425EST

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